Quick Facts

Kazakhstan’s economic freedom score is 63.3, making its economy the 69th freest in the 2015 Index. Its score has decreased by 0.4 point since last year, with declines in property rights and business freedom outweighing a modest combined improvement in half of the 10 economic freedoms, including trade freedom, labor freedom, and freedom from corruption. Kazakhstan ranks 11th out of 42 countries in the Asia–Pacific region, and its overall score is above the world and regional averages.

With strong fiscal restraint, low taxes, and stabilizing monetary policy, Kazakhstan has made steady gains in economic freedom. Over the past five years, its Index score has advanced by 1.2 points with improvements in fiscal freedom, government spending, monetary freedom, and investment freedom.

Kazakhstan’s transition to a market-led economy has been steady, but further reforms are necessary to solidify past gains. Its overall investment and trade regime remains relatively closed to foreign investors compared to regional and global peers. The judiciary lacks statutory independence and is subservient to the executive branch. Corruption is prevalent and reaches into all branches of government.

Background

In May 2014, Kazakhstan signed a treaty with Russia and Belarus to bring the Eurasian Economic Union into being on January 1, 2015. The EEU will have a GDP of $2.7 trillion and a population of 170 million. President Nursultan Nazarbayev, whose rule began in 1989 when Kazakhstan was still a Soviet republic, won a fifth five-year term in 2011 and is likely to stay in power until at least the end of his term in 2016. The opposition is marginalized, and the lack of a succession plan creates longer-term political uncertainty. Production in the giant Kashagan oil field off the northern shore of the Caspian Sea is expected to begin by 2016 and could help Kazakhstan extract 3 million barrels per day by 2030. Kazakhstan is also the world’s largest producer of uranium.

Corruption pervades public services, the judiciary, the security forces, and the economy generally. It also contributes to capital flight. Kazakhstan fell by seven places in the 2013 Corruption Perceptions Index, ranking just 140th out of 177 countries. New procedures were introduced in 2014 to expedite property transfers and registration, but courts lack the capacity to protect property rights effectively.

The top individual income tax rate is 10 percent, and the top corporate tax rate is 20 percent. Other taxes include a value-added tax and excise taxes. Overall tax revenues equal 13.5 percent of domestic production. Oil revenues contribute to public expenditures that total 22.4 percent of domestic output. Public debt equals approximately 14 percent of gross domestic product.

No minimum capital is required to start a company, which takes six procedures and 10 days, but obtaining necessary operating permits requires over five months on average. The labor market needs more flexibility to accommodate rapid economic transformation. Monetary stability is well maintained, but the government subsidizes agriculture and imposes price controls on fuel.

Kazakhstan’s average tariff rate is 3.0 percent. Kazakhstan is working to join the WTO, but non-tariff barriers impede imports of agricultural products. Government procurement processes can favor domestic firms. Foreign investors may not purchase agricultural land. The financial sector is dominated by banks in which the government holds considerable ownership. Nonperforming loans account for over 30 percent of total assets.